This year, I was invited to present (twice!) at the annual ISM conference in Las Vegas. My presentations are part of the “Emerging Practitioner” track designed to help younger procurement professionals navigate the market and develop a career path. It’s a great and worthwhile pursuit for Chief Procurement Officers to invest in their people, so, in that vein, over the next few weeks we will be analyzing the key skills and capabilities (or higher-level competencies) that a procurement professional (and department) should have in place in order to execute successfully. We will be using Ardent Partners’ Procurement Staff Competency Matrix that we developed with our CPO audience. This competency matrix established industry-wide capability measures for the average procurement organization.
We hope this series will help professionals and their managers to better understand and communicate what the required capabilities are for specific job roles within the procurement department and thereby help identify, develop, and deploy the people with the right skills into the most suitable positions. Professionals can also use this series to better identify where current gaps exist in their organization or within their own skill sets so that they can take action to improve or move into roles with greater responsibility (and pay).
Today’s Competency: The Sourcing Process
What is the Sourcing Process?
Leading departments define their sourcing process as one that begins with opportunity identification and carries through contract execution and seeks to standardize their sourcing policies and processes at the enterprise level. Ardent’s traditional definition of “strategic sourcing” is “the process of identifying, evaluating, negotiating, and implementing the optimal mix of goods and services that best support the objectives of the enterprise.” It is important to add two comments:
- The terms “strategic sourcing” and “sourcing” are converging to mean basically the same thing. Strategic sourcing in 2013 is not a static methodology that can only be applied to a large multifunctional project; the days of process overkill are behind us. Teams today must learn to take a more nuanced or agile approach to every sourcing opportunity.
- To be “strategic,” sourcing in 2013 must use eSourcing (and, where possible, other supply management technology like spend analysis, contract management, and supplier performance management).
Sourcing pros that succeed in the consistent execution of their sourcing projects are the ones that take a holistic approach to the entire sourcing process and leverage their process, project management, consulting, supply market, negotiation, and technology skills across it.
Importance to the Procurement Department
Sourcing is generally viewed as the strategic part of procurement since it is the primary (but far from only) mechanism used by procurement departments to deliver savings. Procurement teams that do a poor job in sourcing are unlikely to do anything else very well. Sourcing success is synonymous with procurement department success.
Once procurement departments begin operating their sourcing programs at a high level, the challenge is to sustain program performance while also expanding its scope. Investments in the tools that automate the process are the primary way to scale the program without significant investment in staff and third-party support. The value of tightly integrated and automated processes cannot be understated. Leveraging spend analysis directly into eSourcing projects that result in automated contracts with suppliers whose performance is then actively measured can help to rapidly broaden the scope of a sourcing program to include more spend and improve operational effectiveness and overall stakeholder engagement while driving significant performance improvement.
Importance to Career Advancement
Whether or not you are on a sourcing team today, if you are working in procurement, understanding sourcing is going to be very important to you. If you aspire to become a Chief Procurement Officer and have little to no sourcing expertise, you need to become one fast or choose a new career path. The ability to be able to analyze spend, make the right plans, and take the right actions – to assess, identify, prioritize, and then execute the right opportunities is critical to the success of a procurement department. Understanding the different categories of spend and the supply markets that feed these categories are also critical to developing the ideal sourcing strategy. To consistently derive full value from spend visibility, sourcing professionals need a blend of three types of analytical capabilities or expertise: (1) data analysis (2) category management (3) supply market expertise. On larger projects, it is also important that you have strong project management, consulting, and client management skills.
The sourcing process is just that – a process – so in order to discuss it relative to one’s career advancement, we must treat it a little differently than other, more tangible skills and abilities. Demonstrating that you worked in a fast-paced sourcing environment where you were responsible for realizing greater savings, contract compliance, spend under management, and or contract renewals with your clients are powerful success stories with which to market yourself. Document these success stories and remember them when it’s time for your quarterly or annual review; or the next time you find yourself on the job market.
The CPO’s Grade
Chief procurement officers give their staffs an above average score or B- in our Competency Matrix, meaning that respondents to our survey believe that their staff have a pretty good handle on the sourcing process. This was one of the highest rated skills by CPOs. Discouraging because it is only a B-, but promising since this competency area is also one of the most mature processes in the profession. This likely indicates that when they invest the time and effort, procurement teams can perform well.
How to Advance Your Skills
Sourcing is a blend of “art” and “science” so the mastery of sourcing comes from the ability to drive a crisp process and inject it with nuance. There are numerous courses and dozens of books and online resources for you to research and study the process, but there is no substitute for sourcing experience. Once you gain significant experience running sourcing projects, there are many general truisms and behaviors that you will start to see across many different categories. Experience will help you prepare for and manage them. It goes without saying that I believe that the sourcing leaders in the next decade will be adept in their use of eSourcing to drive their projects. Remember, you cannot spell strategic (as in strategic sourcing) without an e (as in eSourcing).
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